Thursday, July 29, 2010

There are politicians in the Baltic States (3B) who persistently tend to emphasize the unique geographical position of their represented states. Thus the politicians continue to mislead themselves and broad swathes of society, because particularly since the end of the Cold War traditional relations between states, strategies of the military, and international trade policy has witnessed significant transformations.

Within the European Union 3B could be geographically unique indeed, because their size and relative weakness of interest groups should allow 3B to give up anachronistic vestiges of the nation state statecraft and be stellar examples of small but well governed economies. While Estonia has earned laudatory achievements due to its own merits Lithuania and Latvia still grapple with old fashioned premises of nation state governance. It is perhaps symptomatic that you barely hear from Estonian mainstream politicians mythical notions of historic destiny in matters of governance, because for a small, efficient and open economy it is essential to achieve results with available resources.

During the early 1990’s 3B experienced advantage of relatively abundant and cheap labor. Ever since early 1990’s underinvestment in education sector and rapid rise of comparative welfare determines now the future of 3B economies. The only factor of comparative advantage is its relatively free and pristine land. Those scholars and politicians who anachronistically follow geopolitical dictum and speak about the advantage of geographical position of 3B forget that geostrategic position foremost needs human infrastructure. To put it differently geography matters only with sustainable taxable income and here development of human resources has utmost importance.

Baltic ice free harbours connected by pipeline or railroad do not offer much value without population unable to sustain such primary infrastructure from their taxes. Today one may easily continue to be Estonian in Tahiti whilst watching the Estonian Broadcasting Corporation emissions via satellite and ordering his favourite merchandise or services via internet. Technologies and in the World Trade Organization embedded international trade flows are producing truly global economy. It changes old paradigms and brakes material borders. However, it is harder to break mental borders which were constructed into people’s minds through formal education system. Education systems are traditionally conservative, and what really distinguishes well developing and declining economies today are education systems that are able to reform. Ability to reemphasize countries’ prerogatives of foreign trade, upgrade governance, and invest in education as bedrock of viable democracy determines countries’ position in international pecking order. To measure just few international indexes (World Economic Forum, Pisa, UNPA e-government a.o.) it becomes apparent that Latvia continuously falls in terms of its development not only behind Estonia, but now also behind Lithuania and Poland.

3B are ideally positioned to learn from historic examples around them. Finland and West Germany as vanquished countries came out of the war as modernizers leaving anachronistic belief in geographical dictum behind them. At the same time it was the USSR before and now Russia which continues to construct the language of 19.century imperialism and under invests in its human and material infrastructure. Learning from other’s mistakes rather from one’s own distinguishes smart collectivities from not so smart ones. It would be advisable for 3B populations to wake up from wrong myths about ’’special geographical position’’ of their states, ’’bottomless Eastern market’’ or naive assumptions about their countries comparative advantages as ’’the real crossroads between the East and West’’. The 3B are tiny and depopulating, thus geography still matters when one must choose ones strategic partners.

Lithuanian Polish relations are exemplary as well as the Estonian – Finnish relations are institutionally flourishing today. Estonian, Latvian and Lithuanian unity with the Baltic Assembly regular sessions and specialized cooperation between particular branches of government looks good, but in reality the 3B cooperation is an elitist endavour without substantial interdependence.The traditional promoter of the Baltic cooperation is unable to project Latvian soft power even domestically because of governance system being in shambles. Since avoidance of insolvency now Latvia 2.0 needs paradigmatic change of cooperation with its neighbors. Unfortunately Latvia has wasted nineteen years and its external space of maneuvering is limited. Latvian government must continue cooperation with its Baltic neighbors in economic and energy policies. Politically, however, Latvian political class must decide whether they want to develop embedded relations on axis with Scandinavian countries, Poland or Moscow. The infantile policy of oligarchic parties falsely claiming that Latvia is securely embedded in Western security structure and thus free to cooperate and trade with everyone in the East, North, South and West is wrong. Latvian oligarchic groups are thus poorly educated that they have not even learned the old maxim: ’’you cannot serve two kings at the same time’’. It is time for Latvian politicians to wake up from self inflicted and smug dream world, assess the dynamically transforming external environment and decide which path of development they want to emulate. Estonia is reassessing its economic relations with Russia as Lithuania does, but it goes through the transparent process of strengthening the domestic governing capacity and rule of law. Without Latvia 2.0 being implemented the outdated geographical dictum could eventually materialize, but it would not offer Latvia even a chance for a spot on ‘the crossroads between the East and West’’, but simply assign it to the proxy role of transit depot for Eastern hydrocarbon barons...

P.S. Originally this article appeared in the Baltic Times July 1, 2010 issue.

Tuesday, July 6, 2010

The prerequisite for the following of the national interest is the interest aggregation of similarly minded ideological groups of people and the ability of state entities to govern efficiently. Interest aggregation is a continuous process that stems from the foundations of the republic. Efficient government is based on promoting the best possible human resources, thus the virtues of meritocracy and home grown elites would prevail. Interest aggregation and efficient government in the Baltic States (3B) until 2004 were focused on overhauling their antiquated governance systems and fulfilling strategic goals.

In hindsight, one may determine that those alarmists in Riga and Vilnius, who blamed Tallinn for using public relations strategies in order to be invited to start EU membership negotiations after the Luxembourg Summit in 1997 were wrong. Estonia used membership in the Western Club organizations as a means to an end, and such strategy has served Estonia well so far. In May 2010, Estonia was invited to become a member of the OECD and probably in early 2011 would become the member of Euroland.

There are academics and politicians who caution Estonia against entering into the eurozone at a time when the unique currency is undergoing its biggest crisis since its introduction in 1999. There are authors with apocalyptic visions about the demise of the Euroland and EU, but representatives of moderate views are gaining consensus about the roots of the economic and financial governance in the EU - the lack of leadership and inability of the domestic actors to adapt to the dynamic change that is endogenously formulated.

Development strategies have been formulated in the UN and EU, and, since the end of the Cold War, also in the World Bank and IMF volumes of literature have been written about the different policy mix needed to achieve the desired results. The bottom line for achieving tangible results, however, is the ability of domestic political forces to adapt to the dynamic international environment and thus continuously reformulate opportunities that the global marketplace of ideas

Writing of new constitutions in Estonia and Lithuania, differently from Latvia, allowed elites to reemphasize the ideals of their republics and establish generally accepted rules of the game, thus they could readjust their national interest within a level playing field See net neutrality. after major strategic achievements.

Since the early 1990s the power in Lithuania has oscillated between conservative and social democratic majority coalitions. Upgrading of the Lithuanian polity culminated in establishing a mixed voting system as well as in establishing the semi-presidential system. The Estonian coalition of liberal, conservative and moderate political forces have traditionally united against the political depredations of the founder of the Center Party, Mr. Edgar Savisaar. Since the last parliamentary elections, and particularly since local elections in 2009, one may notice that the Estonian party system is transforming after the leadership change among the Social Democrats and heavy disagreements in the People's Union party. The upcoming parliamentary elections in 2011 will probably be hard fought.

It will be interesting to see whether development strategies of the right wing coalition will have credible alternatives coming from the Estonian center left coalition. The absence of mutually accepted rules of the political game differentiates Latvia's development from its Baltic neighbors. The Eurobarometer survey shows that in terms of general distrust in their representative institutions, Estonia is a positive exception among the 3B. Therefore, present Latvian negative exceptionalism is explained with the avoidance of insolvency, doubling of the rate of national debt and continuous political crisis.

Navigating the national economy in times of global economic and financial crisis is a formidable task. The efforts of Mr. Kubilius' government, with President Grybauskaite, to balance formulation of the national interest and to cut red tape do not make him popular. However, the task of Mr. Kubilius is made understandable for the average voter because it was the coalition government, led by the Lithuanian Social Democrats which governed Lithuania into recession and lost in the elections as a result. Latvia's dilapidated governing coalition is unnatural, and ethnic Latvian vs. Russian as well as democratic vs. oligarchic cleavages cut across Latvia's political spectrum.

It is nearly impossible to agree on future development strategies when blackmail, filibustering and populism prevail in the Latvian political culture. In such an environment sound advice of Western partners is not heard, short term policies are embedded, and external enemies are continuously reframed in order to consolidate undecided voters. It only fosters resentment and apathy, when politicians with questionable credentials are pushed through the political machinery to become members of the Constitutional Court, or when the work of the Corruption Prevention Bureau is undermined with the appointment of a heavily indebted person at its helm.

Latvia's ageing population is waiting for unequivocally understood rules of the game, while the younger generation adds to the increasing brain drain. A positive outcome of the October 2010 elections is a prerequisite for the formulation of long term national interests. Traditional political parties in Latvia This is a list of political parties in Latvia.

Latvia has a multi-party system, where no one party often has a chance of gaining power alone, and parties must work with each other to form coalition governments. continue to rely on questionable strategies of spin-doctors, and clearly defined economic programs for stopping deindustrialization and eradicating roots of political crisis that would transcend existing cleavages in society are not yet presented. With such a strategy Latvia's political class continues to fall behind its vexed Baltic neighbors, and gives ample tools to the folks who question the very existence of Latvia.

P.S. Originally this article appeared in the Baltic Times May 27, 2010 issue.

P.P.S. The June TBT article you can access here, latest piece for Estonian readers you may find here, and for the Latvian readers there is something here.